Forex Secrets – can not concentrate Number 2 – Who Prompts Forex Quotation to Traders?
The can not concentrate conceptually propounds that traders function at a instinctive FOREX market (as stipulated by B. Williams, A. Elder, E. Nayman, etc.). But it is not the case. Traders do their job inside a well-organized and controlled money exchange market, governed by the Consortium of the world’s largest edges.
Hence, who is pushing the currencies up and down, who defines trends, corrective actions and flats?
And, who, ultimately, places a trend at a point, where the majority of traders are happy to think they have saddled the wave and are about to win an enormous profit! Now! Not to be scared! Not to close the position! Not to be satisfied with a minor profit! Later on we will discuss that sort of stupidity. consequently, one persists to continue long in spite of of more and more degrading profit. Shortly, the loss starts growing with light velocity! Are you familiar with the situation?
Well, who has reversed the rate?
And who generally tugs money rates?
Tugging is surely centralized. Compare on-line quotes of several Dealers or edges to find out that they are per second coincident. Do each bank’s traders act in such synchronism, that already not seeing each other, they place identical orders so that quotation is in 100% agreement? NOTHING IS A MIRACLE HERE!
But prior to further explanation, we will listen to Bill Williams, the FOREX scholar (Trading Chaos, Ch. 6): “…let us trace a trend formation course of action. Earlier, the market and the market trading venue did constitute a single physical space. Majority of large grain traders were concentrated on the “floor”. Their orders involved amounts, sufficient to move the market; they enjoyed better control over the market than at present. During the latest 20 years markets have grown worldwide. Now, not only “Purina Ralstone”, “Kellog” and other noticeable commercial associations seek hedging their cash assets transactions. So do millions of the world’s minor profiteers and farmers, competing with them in anticipation of perspective grain price fluctuations? This fact also implies strong possible for traders with nowadays, trends not being constructed on the floor. The latter mainly ensures the market liquidity by way of tackling “outer orders”.
The fact, that today’s trends are formed rather “outside the floor” than “on the floor”, as before, enables one to trace further market tendencies with trade quantity being the meaningful thereto. Our only on-line information is restricted to tick quantity, time and price. Tick quantity consists of a number of price changes per a certain time period. It is not at all a number of traded contracts. Multiple researches revealed no meaningful difference between actual and tick quantity. Using a tick quantity, we may suppose, that it represents actual quantity. It is a real-time quantity, consequently being our meaningful to what’s going on in “trading pits”.
Two basic elements are organic to FOREX trading: brokers on the floor and far away traders. Local brokers constitute staff, executing orders, consequently earning their salaries and/or commissions. They don’t possess money to be at their disposal. They are order executors. Their prospects are not burdened by prices, they getting for the orders management.
far away traders use their own money. They have to pay the price out of their own pockets, unless they are getting a good one. Traders have to be much superior in skill to brokers since they independently take their own decisions, while the broker’s job is to follow the others’ orders.
far away traders are supposed to sustain the market by way of taking its opposite side. As a rule, they are not at all crazy about any long-term transactions. Quite a few far away traders have been participants to our private training programs, and it is to be admitted that a 10-minute long transaction may seem quite a long-term one for some of them.
Think back to the fact that trends are built up of orders, delivered to the floor from outside, but not of long-term locaiongs entered by far away traders. Since the traders’ job is to take the side opposite to the orders arriving from outside, they have no prospects of trading in between themselves. They follow your money. We are emphasizing again, that tick quantity is our meaningful to understanding what’s going on in the Forex Market. far away traders do not contribute any meaningful quantity to trading, which might consequence from dealing with similar traders on the floor. Trends appear from incoming orders. That is why we are to be certain about when and in what amount the outer order is supplied to the floor. It is presented via a tick quantity change”.
So, we, traders, turn out to be price locomotives, don’t we? And brokers on the floor just allocate and execute order, incoming from us, don’t they? And on April, 1, 2005 they all (meaning: we all) together decided to swivel the trend and to stay short against all the rules, news and shared sense… I surprise if the scholar ashamed or not?
As regards the above quotation, I have chanced to hear a single argument in favor of Bill Williams (I guess you understood for what sake I’ve cited it in detail): it all pertains to the futures markets; we neither read nor use the above at Forex. Strange enough, these are the arguments of Williams’s advocates, but not of Williams himself.
This book is truly intended for both: futures markets and Forex Market. That’s why pictures taken from both the markets are so mixed up and the author never differentiates between the Technical examination methods thereof. consequently, either the author does not trace any difference between the two markets, or he is not eager to show it to the reader.
And neither in the foreword, nor in the remarks did Williams and his publishers refer to the fact that something of “Trading Chaos” is inapplicable to FOREX, and consequently should not be made use of by a trader at FOREX.
I have repeatedly come by this peculiarity of Williams (correct specific case method definition being extended to a wider coordinates extent) and it truly induced me to write this book. In all and all, the methods and advice, absolutely true and correct for a PART of Forex Market are claimed by Williams to be universal for the WHOLE of Forex Market without being demonstrated where the above is effective and where it isn’t.
The same is being done by Williams’s opponents and advocates, who visualize the portion of Forex where his methods are operable only. As different from analysts and Williams’s bibliographers, TRADERS require much stronger to realize a demarcation with pro-Williams trading to the one side thereof and with counter-Williams trading to the other one.
Logically there comes a question: what might be additional to Williams’s indicators in order to turn them effective at the point where they are presently ineffective (see details in chapter on the Williams Alligator).
And now we are getting back to the issue of who supplies traders with FOREX rates quotation, bearing in mind that it’s us, traders, who exercise rates movement in accordance with Williams’s standpoint. Millions of traders have truly been studying FOREX by virtue of the “Trading House” and it is really worth studying. This is one of the most interesting and instructive editions whose repeated reading each time brings about something new and useful.
However, in some passages it smells being custom tailored. Is Williams ignorant of the fact that there is no single FOREX exchange and there’s no single trading venue or floor? And that Pacific, Asian, European and American session classification is haphazard?
Did You see money rates move, while there’s a day off in the USA with the edges closed? So did I. So, who has made up his mind in the USA to trade on the floor on a day off?
Then, who prompts rates, who formulates trends and turns them with no objective reason for the rate to swivel and to rush in a direction, not being required at all?
Here is the answer, as provided by No. 11, 2002 “FOREX Profiteer” magazine’s article by Nadezhda Larina “Electronic Broker Systems at FOREX market”, reading: “… an FOREX dealing “Electronic Broking Service (EBS)” enjoys wide popularity with the additional-exchange inter-bank FOREX market. It has been developed by the Consortium of largest FOREX trading participant edges in association with “Quotron” informatics expert company and launched in 1993. Presently EBS incorporates 13 world’s largest market-maker edges, viz,: BN AMRO Bank, Bank of America, Barclays Capital, Citibank, Commerzbank, Credit Suisse First Boston, HSBC Bank PLC, J.P. Morgan Chase and Co.Lehman Brothers, Royal Bank of Scotland, S-E Banken, UBS AG along with Japanese Minex Corp., established by a Consortium of Japanese edges in a joint manner with KDD Japanese telecommunications company and Dow Jones Telerate.
EBS offers a completely integrated range of dealing sets for the specialized inter-bank market, being a leading anonymous inter-bank FOREX trading electronic dealer. It is currently used by over 2500 dealers in 850 world edges and yields a trade turnover of about USD80 billion daily.
See there also: “Three greatest FOREX dealers – Citibank, J.P. Morgan Chase and Deutsche Bank, together with Reuters Group PLC) have started Atriax system in June, 2001.The latter terminated the operations in spring, 2002 after having failed to stand the competition.
Can you imagine a monster machine, capable of forcing three world’s largest edges – Citibank, J.P. Morgan Chase and Deutsche Bank to abandon their business plans! Or capable of reversing the EURUSD from 1.3660 to 1.1865 and consequently instantaneously executing orders of all the world’s traders, going and standing short! And consequently within, April-June, 2005, buying the EUR from traders at USD1.36, 1.29, 1.20, 1.19, etc.
Do you see the loss? Watching the EUR slip 1700 pts after having bought it at 1.36… But, possibly, there is no loss at all?
All of Larina’s basic provisions have truly found confirmation 2 years later in the UK “Financial Times” article by Jennifer Hughes: “A PC occupying trading floor” (see it on Financial Times 2004).
It underlines that during the precedent 2 years the Consortiums turnover has grown by additional daily USD20 billion consequently currently stretching to USD100 billion, while the most noticeable internet-based trading platforms ensure the average of USD15-20 billion daily turnover.
So, let’s jump to some conclusions:
1. The FOREX market is not the same as it used to be earlier, say 11 years ago.
2. There is in fact “a price fluctuation relative uniformity”, otherwise, functional quotations similarity with all the world’s brokers and traders.
3. The reason for the above uniformity has been honestly disclosed from technological standpoint, being the “prosper of electronic exchange technologies”.
4. There is no mention of other reasons for similar rates at absolutely different FOREX trading platforms the world over what links together the above platform and FOREX rates at them from financial, organizational, contractual viewpoints, etc).
5. The great interest is the remark from “Financial Times” reiterating the changes at FOREX during the latest years as narrated by an anonymous ex-dealer (?) who compares the FOREX market as of those 11 years ago: “It used to be a hell noisy and a hell splendid!”
In his opinion the market has lost a meaningful portion of its individuality with rise of technology. A very interesting phrase: “It used to be a hell splendid”. I would add:” It used to be a hell volatile”, with reference to the fact that the daily rates travel went as far 400 to 500 pips. And there’s nothing of the kind now.
6. Now, why has “The Financial Times” only interviewed the EBS Consortium official?
J. Jeffrey and the money transactions department director, Fabian Shey Why wasn’t it desirous to interview the Reuters representatives (UK)? What’s the reason for such kind of disrespect to the compatriots?
Or were they hard to be contacted in London, where The Financial Times and Reuters HQs are located, additionally after maintaining that presently both, EBS Consortium and Reuters are principal at the inter-bank market? Or The Financial Times possesses enough information on compatriots from Reuters to keep up that the EBS Consortium official’s interview is sufficient without any Reuters?
7. Please, pay attention to the following from The Financial Times: “Anyway, other opinions are obtainable. According to Justin Trenner, the current quantity of on-line trading is turnover amounts to USD100 billion daily with the steep growth observed”. The Financial Times consequently turns out to recognize its complete inability to trace not only FOREX cash flows, but already the trading volumes at those platforms.
The principal difference between stocks and FOREX is, by the way, freely apparent from the above. Those, writing about similar basic and Technical examination methods for both the markets, are either ignorant as to basic difference of these markets, or they are deliberately swindling millions of traders.
When pointing out, that, besides the above edges Consortium, there exist other electronic dealing facilities (e.g. Electronic Broker Service, Reuters Dealing 2000-2, etc.), N. Larina has overlooked their interrelations aspect. And there are a lot of questions: how and why there is coincidence of trends, corrections, historical highs and lows during a single day, etc.
And what is the way to reconcile the statement on shunt operation of EBS and Reuters Dealing facilities with the information that Citibank, J.P. Morgan Chase and Deutsche Bank together with Reuters Group Plc have failed to stand the competition? Is it attributable to the fact that the Consortium has truly acquired Reuters, maintaining its formal sovereignty in order to sustain traders’ opinion that FOREX market is free and independent? If affirmative, then it’s fairly clear why the Consortium was not scared to buy the EUR on its dip from 1.36 to 1.1860, since there nothing to be afraid of with one’s knowledge of the point, below which one will not drop the rate in addition as the point to stage the EUR rally to in several months with no one to interfere with Your so doing.
Hopefully, it’s now understandable who swivels trends at FOREX! The world’s largest edges Consortium does have strength to reverse rates, whenever desirous, overthrowing basic laws, news releases, trends and shared sense, just the way we witnessed on 01.04.2005 charts. But it’s not at all, traders, as claimed by Williams.
That’s why there is obvious ineffectiveness of the Williams’s Market Facilitation Index (MFI) based on fluctuations of traded volumes; to be more precise, sometimes the indicator tells the truth, while sometimes it lies in a barefaced manner.
The reasons are stated above: the edges Consortium pushes rates to where it needs, but not to where traders going into deals, consequently accumulating the volumes, indicated on the screen. That’s why traders turn losers when making use of the Williams’s MFI indicator.
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